What is a potential result of insufficient competition in real estate markets?

Insufficient competition in real estate markets can lead to stagnation in property prices because, without competitive pressure, sellers may not feel the need to adjust their pricing strategies. When there are fewer buyers and sellers actively participating in the market, it can create an environment where prices do not fluctuate significantly. Typically, healthy competition drives price adjustments, either upwards or downwards, as market participants react to demand and supply dynamics. With a lack of competition, properties may remain overpriced, and potential buyers might hold back on purchasing, resulting in little to no movement in the overall price levels.

On the other hand, increased overall property values and higher quality developments usually stem from heightened competition as developers and sellers strive to attract buyers. Similarly, lower interest rates are typically influenced by monetary policy and are not directly linked to competition levels in the real estate market. Thus, stagnation in property prices is the most fitting result of insufficient competition.